Investment watchdog

Investment
is very important for New Zealand. Investors help finance the industries
and businesses that create jobs and wealth for the country.

What are securities?

Some people save money by putting it in a jar or hiding it under the
mattress. However most people invest their money so that it grows while
it is being saved. For example, they open a bank account, join a superannuation
plan or other investment scheme, pay into a managed fund, or buy bonds
or shares.

Investments like these are ‘securities’. Securities are bought
and sold in the ‘securities markets’. Banks, finance houses,
the stock market, insurance companies, financial advisers and funds managers
are all part of the securities markets.

Investing and risk

Investing money always has some risk. Sometimes an investment may not
pay the investor as much as they hoped, or the investor may even lose
the money they invested.

The trick is to ‘invest wisely’. That means finding investments
that suit your needs and match the level of risk you are prepared to take.
A person with a lot of money, who is prepared to lose some of it, may
choose a very high risk investment which promises high returns. If the
investment fails, the person can afford to take the loss.
On the other hand, a person with small savings is wise to choose an investment
that may not pay so much, but has a lower risk and where it is unlikely
that they will lose all their money.
The golden rule is: the higher the returns, the greater the risk of losing
your money.

Watching the securities markets

Although investing always involves some risk, it is important that people’s
savings are protected by law to some degree. We have laws about the way
securities can be offered for sale to people, and how the investments
are managed.
The body that keeps a watching eye on the securities markets in New Zealand
is the Securities Commission.

Securities law in New Zealand applies to:

the people who give advice about investing

the information a person must be given before they invest money (an
investment statement and prospectus)

the way investors’ money is managed

the information investors are given at regular intervals about their
investment

the behaviour of people in the stock market.

The Securities Commission has powers to enforce securities law. For example,
it can:

ban misleading advertisements for securities

take action against illegal offers of investments

summons people to explain if they appear to have broken securities
law

inquire into breaches of the law and publish its findings

take people to court for illegal trading in shares on the stock
market.

People on the Securities Commission

The Commission has up to 10 members appointed by the Governor-General
on the recommendation of the Minister of Commerce. They are chosen for
their experience and qualifications in business, law, accounting, public
administration or the securities markets.

Making New Zealand a better place

The Securities Commission helps make sure that the securities markets
are honest and open and a good place to do business. When this is so investors
are keen to put their money into New Zealand’s securities markets.
This in turn, provides money for industries and businesses to develop
and to create wealth that benefits our country and its people.